Volkswagen of America, Inc., Agrees to Pay More Than $1 Million for Clean Air Act Violation

(Washington, D.C.-June 15, 2005) Volkswagen will pay $1.1 million to resolve its failure to promptly notify EPA and to correct a defective oxygen sensor affecting at least 329,000 of their 1999, 2000 and 2001 Golfs, Jettas, and New Beetles, federal officials announced today. This is the largest civil penalty to date for this type of violation.

As part of this settlement, Volkswagen completed a voluntary recall of the affected vehicles at a cost of over $26 million. Vehicles with the defect may release thousands of tons of harmful pollutants including nonmethane hydrocarbons (NMHC) and carbon monoxide (CO). NMHC are key reactants in the production of ozone, a major contributor to cancer-causing smog. CO impairs breathing and is especially harmful to children, people with asthma, and the elderly.

"Reliable and effective automobile pollution control systems are an important part of this nation's air pollution reduction strategy," said Thomas V. Skinner, acting assistant administrator of EPA's Office of Enforcement and Compliance Assurance. "This case demonstrates EPA's commitment to ensuring that automobile manufacturers comply with emissions regulations."

Kelly A. Johnson, acting assistant attorney general for the Justice Department's Environment and Natural Resources Division, said the "penalty imposed in this case underscores auto manufacturers' obligation to promptly alert the EPA of defects in emission control devices. The Department of Justice is committed to vigorously enforce companies' responsibility to adhere to environmental laws."

The defect occurs gradually on engine start-up in cool and damp environments when the oxygen sensor (part of the emissions control system) cracks from "thermal shock." The dashboard indicator light illuminates, telling the owner to "Check Engine." Volkswagen received numerous warranty claims associated with cracked oxygen sensors during the winter of 1999-2000, but did not report the defect to the EPA until June 2001. EPA had already discovered excess emissions from a randomly selected vehicle during a routine test.

In addition to paying the civil penalty, pursuant to the consent decree lodged today, Volkswagen will also improve its emissions defect investigation and reporting system to ensure future compliance.